A Note on the Informal Business Sector in Nigeria

Abstract: The study sought to analyze Nigeria’s informal sector by assessing factors that drive and inhibit informality; the characteristics and contributions of the informal sector to the economy using survey data obtained from 2010 National Micro Small and Medium scale Enterprises (MSMEs) Survey as well as data from Doing Business. With the use of simple descriptive statistics, it was found that most of MSMEs were in the informal sector with heterogeneous characteristics. It also found that the informal sector contributes 50.07% of MSMEs’ contribution to Gross Domestic Product (GDP) and 27% to total GDP. The study found that high cost of enforcing contracts, starting a business and getting infrastructure; high and multiple taxations; macroeconomic instability among many others drive informality. On the other hand, information and enlightenment, provision of infrastructure and enforcement of regulation were found to inhibit informality. On the basis of these, several recommendations were proffered.

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Authors: Uwajumogu R. Nkechinyere, E.S. Nwabude, Okey R. Ojike